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Precision Castparts Corp.(PCP - Analyst Report) will be acquiring Permaswage SAS for $600 million in an all cash transaction. The acquisition is primarily to enhance Precision’s offering in the airframe division. The deal is expected to close during second quarter fiscal 2014, subject to regulatory approvals and sanctions.
Permaswage is a leading designer and manufacturer of aerospace fluid fittings. The company provides proprietary and standard components, tooling and training to all major aerospace companies.
Precision will include Permaswage into its Airframe Products division as the latter’s business is expected to improve the value proposition for the airframe business by boosting Precision’s reach into permanent fittings. The Airdrome acquisition had earlier strengthened Precision’s separable fittings business, and this latest acquisition further carries the momentum higher. The Permaswage acquisition is expected to be accretive to earnings immediately.
Apart from vertical integration, the acquisition of Permaswage also provides Precision with geographic and product synergies. Permaswage's core competence lies in designing and manufacturing permanent fittings that are used in fluid conveyance systems for airframe applications and related installation tooling. In addition, Permaswage’ swaged fittings and the increasing presence in separable (threaded) fittings will also benefit Precision. The company has facilities in Gardena, Calif.; Paris, France; and Suzhou, China.
Therefore, Precision is very optimistic about its acquisition of Permaswage, as its permanent fittings business already enjoys a favorable position in the current and next-generation commercial aircraft platforms. Moreover, this acquisition comes at an opportune time when globally the aerospace and the aircraft manufacturers are witnessing increase in orders due to the growing commercial traffic.
Precision Castparts currently has a Zacks Rank#3 (Hold). However, some other companies operating in the same industry and worth considering at the moment are Century Aluminum Co. (CENX - Snapshot Report), Kaiser Aluminum Corporation (KALU - Snapshot Report) and Norsk Hydro ASA (NHYDY). All three have a Zacks Rank #2 (Buy).